If you have ever watched the movie "Wall Street: Money Never Sleeps", then you are probably familiar with the character of Gordon Gekko, the greedy financier who manipulates the stock market for his own ends. And you probably know how the movie ends. With him in prison.
This is the lesson of the market - do not be too greedy!
Why is greed bad for crypto traders?
"Bulls make money, bears make money, but pigs get slaughtered," goes the popular saying. Whether in a bull market or a bear market, you have an opportunity to make a profit if you are using a proper strategy. But being too greedy almost always leads to being unprofitable.
Greedy traders are never satisfied with what they have achieved. They do not know when to close their hands. They just want to keep their profits growing without taking all possible consequences into account.
And these traders are not necessarily all newbies either. Often, new traders will not immediately become greedy - they will so so after having accumulated a little experience in trading. They may become greedy out of regret, feeling they have missed a good opportunity, and wanting to make up for it on their next move. Or, as their experience increases, they may think that their trading technique has improved and can now profit more from it.
Regardless, for most traders greed is an obstacle, because it leads them to take far greater risks than would be advisable. (Making matters worse, in most cases, these such traders use leverage, so they do not even need to deposit funds beforehand.)
Four telling signs a trader is greedy
- No stop loss
To profit from trading crypto, you have to know when to enter and exit the market. Now, many traders cannot properly do this - they only care about increasing profits and expose themselves to excessive risks. Others are aware that setting a stop loss can be a lifesaver, but they just cannot stick to it. The most common situation you are likely to encounter is a greedy trader who sees profits exceeding expectations and continues to hold positions following the trend, hoping to get more profits. And that does not often end well.
Some greedy traders cannot control themselves and chase any opportunity they see. They are obsessed with the opportunities they have missed in the past and promise themselves they will not let even one escape them in the future.
But this is not the right mentality for trading crypto. Trading too frequently is not a way to get rich. Much better is to choose carefully before deciding what to do and then stick to a plan.
- Taking on excessive risks
Large transactions do not mean more profit! If you are not sure what you are doing, you may be taking a lot of risk for no reason.
Even when a poorly-thought-out transaction makes some money, it does not mean it was a good trade if the risks involved where excessive. Many professional traders would count this situation as a loss, not a success.
When trading, if the market trend continues to be in line with your expectations, you might get excited and continue to hold positions for far too long, risking a reversal.
Traders who do not have much experience and use leverage also fall into this category. Some traders are misled by their profit and end up investing too much.
- Take a low risk
Paradoxically, while many greedy traders may be taking on excessive risk at once, there are some who take too little, making repeated low-risk, small-scale transactions. They simply do not want to lose anything to the market and end up missing on opportunities.
After all, in crypto trading, you need to use some money to make more money. How could you do that without taking any risk?
If the risk is too low, profits may be small, too, and your expectations frustrated. Which in turn may lead to even more greed and more tiny transactions.
How to overcome the greed in crypto trading?
Greed is part of human nature, and no one can completely escape it. But at least when trading, you should try to take measures to control it. For example, you can record your past transactions and the motivations behind them. By analyzing previous transactions, you can formulate realistic profit goals based on your own ability and market conditions, rather than your inner desires. In turn, this can help you create profitable routines.